Stop road transport cartels, go competition

The Financial Express, India, January 10, 2011

By Pradeep S Mehta

Taxi charges at many of India’s smaller airports are quite unfair. Most airports, barring the biggest ones, have just one prepaid taxi service. The service often involves a neat price-gouging cartel of taxi operators working in league with the airport authority. For example, at Jaipur when I take a radio taxi to the airport from my house, it costs Rs 160. But in the reverse direction, I have to take an ordinary taxi from the cartel that charges me Rs 320, a price certified as valid by the airport manager. Radio taxis that come to drop passengers at the airport are not allowed to pick up passengers unless they have a passenger booking. This has been going on for years.

This type of anticompetitive practice is very popular throughout our country in the freight truck business also, where local truck unions collude and rip off the local industry. They are unregulated, save for carrying a fitness certificate. On the other hand, the passenger transport sector is usually regulated by the transport department and its fares fixed from time to time, usually going up whenever there is a fuel price hike. In many cases, a taxi driver is armed with a fare chart converting the reading into the chargeable fare. The meter is not revised. This practice is not cartelisation but sanctioned by the authorities for the convenience of the commuting public. But distortions take place, as in the case reported from Jaipur.

In terms of numbers, the transport sector can be regarded as the most competitive, as there are so many service providers. In India, what quickly comes to mind are the auto rickshaws, taxis, mini buses and the various short and long distance buses, which are so many that one would assume that the market offers a perfect competition model. Uniformity in prices, even if they are being asked for without operating the meter, is thus generally seen as being reflective of competition, the assumption being that prices have been driven down to their perfect competition level. But a look at the situation on the ground reveals that there are more human hands at play than forces of supply and demand. One wonders why competition authorities are not taking any action. While they are quick to take on complicated cases, most of which they end up losing, there is noticeable laxity when it comes to apparently clear-cut cases of cartels in the transport sector.

Taxi operators and auto rickshaws in some places openly coordinate their behaviour in terms of prices to be charged, as the official fiat is just too weak. In the case of passenger buses, if the price is dictated by the authority, routes are often allocated by the association and enforced through toughs or goons. The same has been witnessed elsewhere in the world as well. In Nairobi, Kenya, a group of commuter omnibus owners, who wanted monopoly over lucrative routes, had formed a cartel with the help of the police and militia gangs, and a band of thugs was employed to ensure compliance. And some time ago in Cape Town, South Africa, taxi associations were organised into territories in the same way as various gangs controlled different parts of the town. The taxi associations had come to ‘own’ the routes they served. Passengers had to transfer at set boundaries between taxi territories and were compelled to take 2-4 taxis on every trip to work and back, with long waits at points between association boundaries. The otherwise active competition authority was apparently not taking any action against the cartel.

Some competition authorities have taken initiatives against transport cartels. Recent press reports indicate that the competition authority of Serbia had annulled an anticompetitive agreement concluded by five bus operators fixing ticket prices on the regular routes between Serbia and Germany. In November 2009, the competition commission of Singapore took a decision against 16 coach operators and their trade association for fixing the price of bus services from Singapore to Malaysia and Southern Thailand. The Danish competition authority is also reported to have fined the Danish coach drivers association, together with its director and deputy director, for encouraging a concerted price increase. Action was also taken by the Polish competition authority some years ago, which fined five taxi companies for entering into an anticompetitive price fixing agreement.

Curbing cartels in the transport sector is also an opportunity that can work to the advantage of the competition authority. This is one of the best ways for the authority to endear itself to the general public as the decisions concerned will yield immediate results and these will be easy for all to see. Is the the Competition Commission of India listening?

The author is the secretary general of CUTS International. Cornelius Dube of CUTS contributed to this article

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